Purpose: To determine how well models for decisions under uncertainty can describe an investment in a human resource.
Method: A standardized structured expert interview with a decision maker of human resources investments was made. The empirical material from the inter-view is then compared against the main proper-ties of the two models.
Conclusions: The traditional decision analysis can describe the process of investments made in human resources where absence of management exists and the in-vestment has limited time duration. The real op-tion analysis can describe the process of invest-ments made in human resources where process is characterized by sequential decisions made about the investment.
Contents
SETTINGS
PURPOSE
METHOD
THE STRUCTURE OF THE PAPER
BACKGROUND
TDA & ROA
TRADITIONAL DECISION ANALYSIS – TDA
A heritage from game theory
Model prerequisites
Definition of TDA
Acts
States of nature
Probabilities
Evaluation of acts
Different types of probability
Objective probabilities
Subjective probabilities
Conditional probabilities
Decision randomization
Main properties of TDA
REAL OPTION
The history of real options
Difference between real options and financial options
Real option – definition
Real option – framework
Spotting options
Different types of real options
Value drivers in real options
Real option analysis
ROA – an example
Main properties of ROA
CASE DISCUSSION
FIRST STAGE
SECOND STAGE
THIRD STAGE
DISCUSSION
The investment decisions
Ph. D student
Teacher/Senior lecturer
Administrative personnel
General discussion
CONCLUSIONS
GENERALIZATION
FUTURE RESEARCH
REFERENCES
APPENDIX
INTERVIEW QUESTIONS
VON NEUMANN & MORGENSTERN’S UTILITY FUNCTION
Axiom of indifference
Axiom of transitivity
Axiom of continuity
Axiom of monotonicity
Axiom of reduction of compound lotteries
BAYES THEOREM
Author: Emil Numminen & Fredrik Falkenback
Source: Blekinge Institute of Technology
Reference URL: Visit Now